INSTRUCTOR’S MANUAL:
FISCAL ADMINISTRATION, ANALYSIS AND APPLICATIONS FOR THE
PUBLIC SECTOR
JOHN L. MIKESELL
INDIANA UNIVERSITY
NINTH EDITION
1
,Chapter One
Questions and Exercises
1.
a. Yes. Total project benefits (4,900) exceed total project cost (4,000).
b. No. No individual has benefits greater than cost of project.
c. No. Based on net benefits, A and B would vote yes; C, D, and E would vote
no.
d. Revise cost shares so that Residents A and B pay more and reduce cost shares
borne by C, D, and E.
2. Many of the benefits of primary and secondary education are public or social
(external to the recipient of the education). The entity paying for the service is
not able to capture the full benefit of the service.
4. No – the bread is rival and exhaustible.
Examination Questions
1. Bain Educational operates an elementary school in Big Bucks, Kansas. It is open
to any student in the local school district and the school is financed by a property
tax levied by the local school district. This represents an example of:
a. public provision and public production
b. public provision and private production
c. private provision and private production
d. private provision and public production
2. Which of the following arguments is based on the concept of adverse selection?
a. The U.S. Military needs higher pay to attract the best personnel.
b. Private medical insurance companies seek to exclude those most likely to
need healthcare.
c. Only the national government can successfully conduct macroeconomic
stabilization policies.
d. Mosquito abatement is a public good.
3. Which of the following would be described as a common pool resource?
a. A can of soda
b. An aquifer
c. National defense
d. A movie theatre
2
,4. Which of the following is an application of the principle of moral hazard?
a. People build homes in areas subject to severe flood damage when federally-
subsidized insurance is available.
b. Inappropriate lyrics are available for downloading through the Internet when
regulations are not enforced.
c. Actions by one individual have an impact on innocent bystanders.
d. None of the above.
5. Toll goods are characterized by:
a. joint use and exclusion not feasible.
b. alternate (or competitive) use and exclusion not feasible.
c. joint use and exclusion feasible.
d. alternate (or competitive) use and exclusion feasible.
6. Non-appropriability consists of the following two aspects:
a. nonsubsidization and nondistribution.
b. nonexclusion and nonexhaustion.
c. taxing and spending.
d. none of the above.
7. A public project produces the following pattern of individual benefits and costs
for the people influenced by the project.
Individual Benefit Cost Share
A $8,000 $7,000
B $6,000 $5,000
C $10,000 $9,000
D $4,000 $6,000
E $2,000 $6,000
Total $30,000 $33,000
The project:
a. passes the Pareto criterion but is not economically feasible.
b. would pass a majority vote but not the Pareto criterion.
c. passes the criterion of economic feasibility, but would not pass majority vote.
d. passes the pareto criterion but would not pass a majority vote.
3
, 8. If a good is characterized by easy exclusion but many may concurrently use it
without reducing the amount available for others, the good is a:
a. private good.
b. common property resource.
c. toll good.
d. public good.
9. Which is not a reason for privatizing government services?
a. To increase production efficiency.
b. To improve service to the public.
c. To raise cash.
d. All of the above are reasons to privatize.
10. Logrolling is the process where:
a. one legislator trades his/her vote on one issue in exchange for the vote of
another legislator on a second issue.
b. campaign contributions are used to secure a legislator’s vote on a particular
issue.
c. media campaigns are initiated by special interest groups to sway public
opinion and subsequently legislators votes on issues.
d. unrelated amendments are attached to pending legislation to secure its
passage.
4
FISCAL ADMINISTRATION, ANALYSIS AND APPLICATIONS FOR THE
PUBLIC SECTOR
JOHN L. MIKESELL
INDIANA UNIVERSITY
NINTH EDITION
1
,Chapter One
Questions and Exercises
1.
a. Yes. Total project benefits (4,900) exceed total project cost (4,000).
b. No. No individual has benefits greater than cost of project.
c. No. Based on net benefits, A and B would vote yes; C, D, and E would vote
no.
d. Revise cost shares so that Residents A and B pay more and reduce cost shares
borne by C, D, and E.
2. Many of the benefits of primary and secondary education are public or social
(external to the recipient of the education). The entity paying for the service is
not able to capture the full benefit of the service.
4. No – the bread is rival and exhaustible.
Examination Questions
1. Bain Educational operates an elementary school in Big Bucks, Kansas. It is open
to any student in the local school district and the school is financed by a property
tax levied by the local school district. This represents an example of:
a. public provision and public production
b. public provision and private production
c. private provision and private production
d. private provision and public production
2. Which of the following arguments is based on the concept of adverse selection?
a. The U.S. Military needs higher pay to attract the best personnel.
b. Private medical insurance companies seek to exclude those most likely to
need healthcare.
c. Only the national government can successfully conduct macroeconomic
stabilization policies.
d. Mosquito abatement is a public good.
3. Which of the following would be described as a common pool resource?
a. A can of soda
b. An aquifer
c. National defense
d. A movie theatre
2
,4. Which of the following is an application of the principle of moral hazard?
a. People build homes in areas subject to severe flood damage when federally-
subsidized insurance is available.
b. Inappropriate lyrics are available for downloading through the Internet when
regulations are not enforced.
c. Actions by one individual have an impact on innocent bystanders.
d. None of the above.
5. Toll goods are characterized by:
a. joint use and exclusion not feasible.
b. alternate (or competitive) use and exclusion not feasible.
c. joint use and exclusion feasible.
d. alternate (or competitive) use and exclusion feasible.
6. Non-appropriability consists of the following two aspects:
a. nonsubsidization and nondistribution.
b. nonexclusion and nonexhaustion.
c. taxing and spending.
d. none of the above.
7. A public project produces the following pattern of individual benefits and costs
for the people influenced by the project.
Individual Benefit Cost Share
A $8,000 $7,000
B $6,000 $5,000
C $10,000 $9,000
D $4,000 $6,000
E $2,000 $6,000
Total $30,000 $33,000
The project:
a. passes the Pareto criterion but is not economically feasible.
b. would pass a majority vote but not the Pareto criterion.
c. passes the criterion of economic feasibility, but would not pass majority vote.
d. passes the pareto criterion but would not pass a majority vote.
3
, 8. If a good is characterized by easy exclusion but many may concurrently use it
without reducing the amount available for others, the good is a:
a. private good.
b. common property resource.
c. toll good.
d. public good.
9. Which is not a reason for privatizing government services?
a. To increase production efficiency.
b. To improve service to the public.
c. To raise cash.
d. All of the above are reasons to privatize.
10. Logrolling is the process where:
a. one legislator trades his/her vote on one issue in exchange for the vote of
another legislator on a second issue.
b. campaign contributions are used to secure a legislator’s vote on a particular
issue.
c. media campaigns are initiated by special interest groups to sway public
opinion and subsequently legislators votes on issues.
d. unrelated amendments are attached to pending legislation to secure its
passage.
4
